As a followup to yesterday’s post about FreeCreditReport.com, I wanted to open up a discussion about whether or not you care about your credit score.

On the one hand, I’ve written extensively about why you should care about your credit score… Like it or not, your credit score does matter, even if you don’t intend to borrow money. In fact, insurance companies, utilities, apartment complexes, and even prospective employers regularly check credit scores when evaluating potential customers/employees.

On the other hand, debt reduction guru Dave Ramsey has disparaged credit scores as being nothing more than “debt scores,” and has gone on record encouraging his followers to “stop worshiping at the altar of the FICO score.” Dave’s point here is that you need to focus on getting rid of your debt rather than worrying about what effect doing so will have on your credit score. I agree, but…

I still care about my credit score. I’m a realist. Like it or not, credit scores play a central role in many aspects of our financial lives, and it doesn’t cost me anything to have a good one. I don’t lie awake at night worrying about it, and I most certainly don’t base major financial decisions on the impact it will have on my credit score, but I do care about it.

The simple truth here is that living a responsible financial life typically results in a high credit score. My wife and I use credit cards as a convenience, but we always pay our balance in full, and have never carried consumer debt. We save and invest aggressively, and we have a 15 year fixed rate mortgage that will be paid off well in advance of its due date. We also have credit scores just shy of 800.

My point here isn’t to brag, but rather to point out that you can have your cake and eat it, too. While it might feel good to thump your chest and claim that you’re looking forward to getting out of debt and having a credit score of zero, it’s not an either/or proposition. In fact, the two are intrinsically linked. As you work to get yourself out of debt, your credit score will likely rise — and that’s a good thing.

About the author:Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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Comments (scroll down to add your own):

I agree that you shouldn’t worry about your credit score. If you simply live your life within your means and financially prudent, your credit score will take care of itself. My credit score is just under 800 as well, not because of anything special that I’ve done, but because of the lifestyle that I lead.

Definitely, pay off your debt. Don’t try to leave it on so you can keep your score up. But sadly, it’s true that it could affect you. It makes no sense. Last week Peter Schiff was talking about how his own FICO had really dropped and he owes nothing! He pays everything in full each month, and his FICO dropped into the 600’s. I guess FICO might also be a number for how much money they think they can get out of you…. you know, pay them a little extra AND pay back everything you borrowed. That’s what they want. I’m going to forget about that though – I’ll pay it all off.

Right now I could give a crap about my credit score. I’m getting out of debt and at this point that is my focus. Once I’m out of debt, have the emergency fund, retirement and kids college done then I’ll worry about it.

The only reason I would really care to keep it decent would be for another mortgage but I’d really like to pay cash for every single thing I ever buy.

People who lead responsible lives like Mike shouldn’t have to care about their credit scores, because it’s a natural reflection of his good credit usage. But for those who have bad credit, credit scores can be an extremely useful tool to set a precedent that they can improve on.

Some credit monitoring services even allow you to lock your credit report to protect it from being hurt by fraud.

Dave Ramsey uses the “don’t worship at the altar” quote in reference to cutting up and canceling credit cards. And occasionally in reference to having multiple types of debt.

I also find it hard to believe that anyone would advocate maintain reoccuring debt for credit score purposes. But that’s not the context he uses that phrase in.

My credit score is 760+ and I’ve never had a mortgage. In addition within the last year, I literally canceled all of my credit accounts. Some people think the actually canceling of the accounts is dumb because it hurts the length of credit history and your score.

Dave’s view is that maintaining intensity, passion, and commitment are more important than a temporary ding to the score.

The guy who commented on your last thread was just a little off base, that’s all. I’m one of the most passionate anti-credit people you’ll find, but I would never advocate ignoring your score completely and neither does Ramsey.

I don’t care about my credit score at all because my goal is to borrow as little money as possible. That being said, if I make wise financial decisions, my credit score will be strong enough for the other stuff anyways. I don’t worship it but yet my financial decisions should only increase it.

He’s not talking about a “temporary ding” to your credit score here. Rather, he went on to argue that it will go down, and that you shouldn’t care. I disagree on both points.

First, your credit score will likely rise as you get your financial house in order and, contrary to popular belief, it won’t suddenly go a cliff if you stop borrowing. The is especially true if you simply pay of your debts but leave the accounts open. Why not? It doesn’t hurt anything to do so.

Beyond that, as I’ve detailed above and elsewhere (and as you yourself have acknowledged), there are good reasons to care about your score.

In reality, the “only way to maintain” a good credit is to borrow and pay back over the long haul. Of course, after multiple years (around 7) of not borrowing you wouldn’t be maintaining anything. I think Dave was probably making that point and simplifying it based on the format where you heard that specific clip. You’re credit score may not go “down,” but it won’t go “up” as much as it would.

I’ve devoured a lot of Ramsey material, FPU, books, radio, television and have never heard him make a point that indicated he believed you should totally ignore your score. He doesn’t want you to prioritize your score over certain other things (which are controversial).

Ramsey certainly has straw men, but in my opinion this just flat out isn’t one of them.

Ramsey’s message is somewhat contradictory when it comes to credit scores. As Nickel pointed out, Ramsey openly jokes about worshiping at the altar of FICO and how his own credit score is probably around zero. I listen to his podcast every morning and I hear him say something along these lines at least once a week.

With that being said, one of my co-workers is currently attending his FPU (Financial Peace University) course. Last night’s lesson was you guessed it – monitoring your credit score.

If Ramsey has such a total disregard for FICO scoring then why would he stress the importance of monitoring it in his coursework?

And remember – Ramsey is a millionaire. If I had that kind of money I seriously doubt that I would care that much about my FICO score either…

I still care about my credit score! Why wouldn’t I? Having a high credit score is like having an ID to a super exclusive club, the benefits of which are all the best rates and terms on homes, cars, boats, not to mention a thumbs up on my behalf to potential employers and landlords.

I agree that it’s smart to take care of your debt and shoot for the goal of living your life free from those burdens. But the two things go hand in hand. If you rid yourself of debt, your credit score will likely be high and healthy, and you’ll gain access to that wonderful “savings club” that a stellar credit score affords you.

Being younger I don’t even know what my current credit score is, which I know I should. I pay in full my bills each month and have no issues with credit in the past so I am assuming it is good for my age, hope so at least. I know I need to pay more attention but until it’s necessary, probably won’t be too interested in it.

“Like it or not, your credit score does matter, even if you donâ€™t intend to borrow money. In fact, insurance companies, utilities, apartment complexes, and even prospective employers regularly check credit scores.”

If you are a homeowner, then renting an apartment is of no concern
IF you already have utilities, then you score is of no concern. At most, utility companies require a refundable deposit retuned after 6 months or consistent payment. Here it is $100 – or you can have an existing customer co-sign.
Most employers do not check credit scores, and not not using credit will not keep you from getting a job. I can’t think of a single instance where explaining you are completely debt free would be bad.

Ahhh, the insurance score. Not the same as a credit score, only one of several other components that go into evaluating insuance risk, and the insurance score by itself cannot influence rates or coverage approval/denial.

And when you stop using credit all together, your score doesn’t continue to go down. I see scores every day. They don’t have a score of zero, they have NO SCORE. No Score is different than a bad score.

You can still get a mortgage with no score, or a car loan, or many other types of loans, even though you shouldn’t be borrowing money.

The point is Ramsey is right. Forget about your credit score. You will live just fine without it. If you never use credit, have no credit available, pay off and close every debt and never play the game again, you will still get insurance, still get utilities, still get hired, and still live.

A credit score is only useful if you plan on borrowing money again. If you don’t, it doesn’t matter.

I think the original blog entry is right on point — I’m in the minimal debt camp, but I do care about my credit score. A person should always care about his reputation — you never know when it might be important. Who knows — maybe I’ll need to borrow money again. In the meantime, when I re-did all my insurance recently, I was pleasantly surprised at how big a factor my good credit score was in getting me better rates. Still, that credit score seems to have remained good despite very little use of debt over the past ten years.

Troy, you are right in that your credit score is different than your insurance score.

Insurance companies use the information contained in your credit report (and no, they do not need your social security number to do this anymore) to calcluate their own score. Your credit history does play a major role in the price of insurance. You cannot be denied insurance soley based upon your credit, but they can change you such a rate that you wouldn’t want to pay it.

I’ve worked in insurance for the past 11 years, both as an agent and in a home office function.

Like it or not, your credit report will affect how much you pay for insurance. Even if you don’t have a credit file, you are still not going to receive the best rates.

Dave Ramsey has a point, I have always had a better credit score than my husband because I used credit sooner and more extensively than he did. I also got in over my head a few times and then paid it down, while he stayed pretty level headed till about 2006/2007 when he got in WAY over his head, and then we had to tackle our debt together.

That being said we are in the process of a re-finance and both our scores are above 730, the minimum they were looking for to give us the lowest rate possible.

These days you simply must consider the impact of your decisions on your credit score. You may not need it right now–or even care about it–but there will come a time when you need it. If you take care of it, it will take care of you.

My employer checks prospective candidate’s credit report before hiring them–just to make sure that person does not have any items in collections or past due accounts (thus making them more likely to steal money). But I’ve never heard of an employer looking for an ideal credit score range.

Further to Ashley’s point about credit scores and hiring, besides bad credit creating a theft risk, employees with debt problems tend to suffer from major distractions which take away from their job performance, and sometimes require the firm’s intervention. I never used credit reports in hiring, but I can see the validity of it!

@ Richard – some employers look for prospective employees that have a decent debt load in order to keep them motivated to sell. The sales profession has had this debt incentive mentality for some time.

The bottom line is that if you want to be on the credit-grid, go ahead and do what’s needed to maintain a healthy FICO score. If you’re going off-credit-grid, who cares? So what if you pay more for insurance or have to make a deposit with the utilities company…you’re still money WAY ahead because you’re completely debt free.

For me, I couldn’t care less about my credit score. I’m self employed, live a cash lifestyle, finance the biz on a cash basis, and won’t require another loan so long as I live. The net result…I don’t care. Besides, with all of the new PF sites like Thrive, Mint, etc., I think we’ll be seeing a more accurate scoring system of your personal financial health sooner than later. Always remember that FICO was developed for lenders, not consumers.

@ Nickel – when you say you use credit cards for convenience, what convenience do they offer above debit cards? I’m curious as to your perspective on this.

Michael: Great question. The big problem with debit cards (for us) is that we try to keep a fairly low balance in our checking account since it doesn’t pay any interest. Yes, we could do better, but this particular bank is very conveniently located, has tons of ATMs in the area, etc. so we deal with it. We keep the majority of our money in an online savings account where it earns considerably more (though not so much right not with all the rate cuts). Anyway, given this setup, it’s far easier to use a credit card and not have to actively manage the balance in our checking account. Instead, we just make a transfer at the end of the month when the bill is due.

Of course, this sort of approach could be a recipe for disaster if you don’t have your spending under control, but… It works for us. On top of that, we earn much better rewards than are typically available for debit cards.

Hi,
I have a question on credit cards. I have 3 credit cards with the same bank – Chase. I am thinking of consolidating them by keeping open the one that has been open the longest and asking Chase to transfer the available credit from the 2 I am going to close to the 1 card I will leave open. Since I am closing 2 cards that were open for shorter periods and will have all available credit limits transferred to the 1 remaining open, this should have no effect on my credit score. Correct? I have zero balances on all accounts. This would just make my recordkeeping that much easier.

Try paying with cash instead of using credit cards or loans as much as possible. Do not let credit companies monitor your financial activities and life. They try to make your life dependent on magic credit score numbers. Use your real name. Do not use name covered by 720 or 850. Why not Roman ?.

I really don’t care about my credit score, read articles how it goes down if you do this and that, and all good though. Government runned and it sucks, so no I don’t care about my credit score because it is nothing but a bull crap government stance. jmo

I decided just yesterday that I don’t care anymore about my credit score. Why should I? You try to do the right thing, like pay off your debts, and it drops 50 pts. You pay off your car loan early to stay out of debt, and it goes down 100 pts. And on top of all this, this mysterious FICO won’t even share with the public the formula they use to calculate these things. I’m sick of having ‘the man’ control my life. I don’t want to have credit cards, but I’m told I should have one to make my credit score higher? F**k em! Yesterday I wrote pay-to-delete letters to my creditors because I want to eventually get a car loan and felt this would be a good way to raise my score. The total amount I was offering to pay was $5,000. Well, I didn’t mail them. Instead, I realized, I could pay-to-delete and the collection agencies probably wouldn’t keep their promise to delete and I’d be out 5,000 bucks paying off debts that I feel are unfair to begin with, OR I could keep my $5,000 and just get a high-interest auto loan, and just pay the high interest, which would probably be about 5k anyway. Sounds like a good plan to me, since the car loan is the only money I plan to borrow in my life. I have zero interest in owning a home because all that is is a glorified apartment because you don’t own it for 30 years, the bank does. If you have a low credit score you can always get approved for an apartment by offering 6 months rent upfront or paying a higher deposit. Renting a car, you can use a debit card to do that. I plan to just live my cash lifestyle and live with my 578 score for the next 7 years till the debts fall off. And I’m tired of my ability to be a good person being based on some number. I know someone with a perfect credit score of 850 and she is the nastiest, most evil person alive, so this number is meaningless in the long run. It’s about time we all took control of our own finances and live cash lifestyles and be unapologetic for it!

I agree with “Me” 100%. Don’t borrow money. Save and be responsible.I am sorry to say that there will always be plenty of people willing to get buried in debt because they have to have right now. My motto, “Don’t pay interest, make interest”. I could care less about my credit score and I’m doing great. I live within my means. Keep’em in debt and they’ll be work’in their butts off for the rest of their lives.

It might help to know that the same thieves that run the banks, that push the credit cards, conspire with the thieves that run the three terrorist info companies who ultimately decide your employment, determine your mortgage, and your insurance rates.

Yeah, when the banker said I had a credit score of 740, I asked him what his was………because I can’t in good conscience do business what a bad lender. He was, of course, offended. But why?……shouldn’t we all grade the banks as they grade us?……..of course we should. His “nice banker score” was way down, so I went elsewhere. Now you’re thinking I went in for a loan, right?……Noooo, it was to locate a reputable institution to deposit two million dollars.
These lowlifes that pretend to lord this FICO thing over us need spankings. I mean good solid bare-a$$ looks-like-two-jap-flags spankings. They are the same folks that lent all that money to people with no jobs, no documentation, and no verified income(!!) back in ’05, ’06…and caused the housing market to hemmorhage. They call those good loans?……..don’t you wonder what those people’s FICO scores must have been? Like in the dumper??….so why should any of us even believe these lenders anymore?….FICO scores didn’t mean anything to them then….so why now?…Anyway, I waved the two mil under his nose so he could get the smell of it, and then left.
Oh, by the way, no, I dont care about scores. And if the rest of you stop caring when they try to use that lever on you, they’ll soon realize that payments will just stop coming in just to stick’em, and never mind the stupid “score”.

I don’t believe in the FICO score. Why have scoring companies for debt? I feel they are companies that are a waste of time and are not used wisely. How stupid is it to borrow. Learn to live with-in your means. Credit cards are not emergency funds. Cash is an emergency fund. I believe in the DR way and want to get rid of a credit score as I never want to borrow again. Next thing we need to get rid is Lawyers!

F NO I don’t care about my credit score anymore! I did everything right, built credit, saved 20% down to get a home, blah blah blah. And for what? To be totally f’ed finanicially by those who are too big for their britches, I mean, too big to fail. This credit score crap is a ruse they use to hold us over a barrel. I swear, the banksters always find something to not give you the best rates, even if you have paid all your bills for 30 years. I still have a job; I’m still up-to-date with all my bills and mortgage; I just paid off my car and I have no more credit debt because I chopped them all up and threw them away. I don’t need a bunch of cheap, designed to fall apart in a year, consumer goods from China where they sent all our jobs. No thanks, global corporate, you can stick all those poison products up your bum. And your damn credit scores too. After the bail out, I left Chase for a credit union and vowed to never use a credit card again and never take another loan. Basta!

I’m so proud of you folks who are on here bragging about your great financial responsibility. Having been the proud owner of a high credit score, I get it. For three decades of adult life I never missed a payment, never bounced a check, and lived within my means. However, when I was fired from my job and unable to find another paying even half of what I was making I was unable to pay my unsecured debt. My score went from 780 to 450 in less than a quarter. I was sure my world was falling apart. But as my life continued I realized, no, it’s not going to fall apart. Not over this, anyway. I also learned that it’s not illegal to default on debt. So my fears of the law coming after me are gone. It’s not necessarily a good feeling, but I really just don’t give a crap about paying back the banks. The loans were offered to me based on my willingness and ability to repay them, and I accepted them based on my willingness and ability to repay them. My ability left before my willingness; but now I have neither. They call regularly wanting the money, but I ain’t got it. I am not the same person who was offered and accepted those loans. So basically, THEY can bend over the barrell now. And everyone who cares bout my credit score can suck it. I don’t care about it and will never look at it again. I do not need credit. I’m an excellent worker, highly educated, and will always be able to support myself no matter what BoA and Chase think. I know that I will never be rich, but I’m comfortable and because I’m lucky enough to have been born an American and I’ve learned to cook, I eat well for cheap. I’ll propbably never drive a Ferrari, but my little old Civic is mine and it runs like a champ. I know that the Sun will rise tomorrow. Folks, money is fake. It’s all a load of hoowee. What matters most is your happiness. I will continue to go from failure to failure without losing enthusiasm, and never forgetting to stop and smell the roses. To you all I say “Live long and prosper…” but don’t think that propserity can be gauged by credit scores and money. You are a child of the most high God and no human, no company, and no score has the power to change that. You are destined for eternal greatness. There is no other way. I love you all… even you assholes out there reading this.

I gave up on caring about credit. I had bad credit and waited seven years. It was because of an ex. Finally, I had good credit again. Then I found out I owed my local library some overdue fees. I offered to pay them. A woman said I should wait until I get a notice in the mail. I never got one. Then, suddenly, my credit is ruined by overdue library books. So I stopped paying my credit cards and debts and let my credit go down the tubes. How can a library have the right to ruin my credit? The whole things is a joke.

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